Walmart has 2 huge advantages that should terrify Amazon (WMT, AMZN)

A customer shops at a Walmart Supercenter in Rogers, Arkansas June 6, 2013. REUTERS/Rick Wilking

Thomson Reuters

Walmart is no longer playing catch-up with Amazon, according to Barclays.

Walmart has shifted to "playing offense" against its biggest rival, and the retailer has two strengths giving it a key advantage: its physical stores and its grocery business.

"Walmart has an omni presence – Amazon does not – and Walmart can leverage its 3,522 US Supercenter units to gain a meaningful advantage over Amazon," analysts wrote in a research note published Wednesday.

Walmart is already using its stores to get a leg-up over Amazon online. The retailer rolled out a new discount last week on items that shoppers buy online and then pick up in one of Walmart's 4,700 stores — including those 3,522 Supercenters. This cuts down on shipping costs for Walmart, and Walmart passes those savings on to customers.

Walmart is also dominating Amazon when it comes to groceries, a category that Amazon entered in 2007 with the launch of a delivery grocery service called AmazonFresh.

Walmart

Business Insider/Hayley Peterson

Amazon has been ramping up its investment in the category lately with plans to open physical grocery stores, but Walmart is still far ahead of Amazon in the grocery market, according to Barclays.

"Walmart dominates in food in the US with (for the most part) the most attractive prices in food retail nationally," analysts wrote. "Amazon has not yet solved for fresh, nor are price points in non-perishables attractive. In addition, pricing in non-perishables is fairly complicated and inconsistent – a function of the fact that many items are from third party vendors."

Walmart offers in-store pickup for groceries ordered online at 600 stores nationwide. That number will increase to 1,100 stores this year, according to the company.

Walmart is also testing grocery delivery in several markets.

"If Walmart can solve for the last mile in fresh/food with simple, clear, and low pricing, Walmart would leapfrog Amazon in food delivery," the analysts wrote.

This would give Walmart an advantage in non-food categories, like general merchandise, as well, according to the analysts.

Overall, the analysts estimate that Walmart's ecommerce sales grew 36% in the fourth quarter, compared to 20% growth for Amazon in the period.

"Walmart has clearly decided to not only aggressively address its ecommerce inadequacies – the company appears to be trying to take Amazon head on," the analysts wrote.